December 5, 2011

New Twist in the Obamacare Lawsuits

The legal case against the Affordable Care Act may have just become weaker. And it’s not because of anything that happened in Washington. It’s because of something that happened in Florida: The filing of bankruptcy papers by Mary Brown, who until recently owned and operated an auto repair shop near Pensacola.

Brown’s story, which the Wall Street Journal reported in Monday’s editions, seems genuinely heartbreaking: From the sounds of things, the twin shocks of the recession and the Gulf oil spill basically killed her business. One former employee tells the Journal that Brown fought “every day” to keep the shop going. Another describers her as “professional, truthful, honest" and adds that "she really took care of us."

But Brown isn’t just any old small business owner. She’s the lead plaintiff in the lawsuit against health care reform that the National Federation of Independent Businesses (NFIB) and 26 states filed in 2010. Yes, that’s the same case the Supreme Court just agreed to hear – the case that could determine whether Obamacare, as it’s come to be known, will stand or fall.

The Journal story – the product of excellent reporting by Emily Maltby, Vanessa O’Connell, and Jess Bravin* – focuses on the new legal issue that Brown’s financial situation raises: She may no longer have the standing to sue. According to the article, the bankruptcy makes it more difficult for Brown to claim that the Affordable Care Act will harm her interests, since she can no longer claim it will damage her business. In addition, the article states, her financial situation makes it more likely she wouldn’t even be subject to the mandate – again, calling into question whether she can claim the law would harm her.

I’m not a lawyer, so I’m really in no position to adjudicate the standing question. Among other things, this particular lawsuit has another named plaintiff. NFIB certainly thinks the case can go on, just as before.

But the more interesting and, to my mind, more important implication is what Brown’s bankruptcy says about the actual merits of the lawsuit – and, ultimately, the legal rationale for the Affordable Care Act. Based on available information, it may illustrate almost perfectly why the law is necessary – and constitutional.

The legal case against the health care reform really boils down to one question: Does the government infringe upon your freedom when it demands that you obtain insurance or pay a penalty, as long as you have the money to afford it? Or is the government merely asking you to help bear the cost of medical care you will inevitably consume – a cost that, otherwise, the rest of society would have to pick up, chiefly in the form of higher taxes, higher insurance premiums, and lost income?

Brown adheres to the former point of view: “No one has the right to try to control how you spend your money,” Brown told the Journal. But the bankruptcy filing that she and her husband made, and which TNR obtained via online court records, lists among the couple's unsecured creditors several providers of medical care – a hospital and a physician group in Florida; an anesthesiology group based in Mississippi; and an eye care center in Alabama. The total, based on the court filing, appears to be a little less than $5,000. The bankruptcy filing also indicates that the couple has $400 in expected monthly "medical and dental" expenses.

I can't be sure how those bills were generated. And I certainly don’t want to speculate on whether Brown and her husband will end up paying part or all of those bills, as I have no way of knowing. (Brown's bankruptcy attorney declined to comment when reached by phone and the lawyer in the federal suit referred calls to the NFIB, whose spokesman said she was unable to comment on the specifics of Brown's situation. I also tried calling a number in Florida that appears to be Brown’s, based on a web listing. A recording said the mailbox was full.)

But this much I do know: Bankruptcy proceedings frequently leave doctors and hospitals with unpaid bills. When that happens, doctors and hospitals write off the cost as “uncompensated” care – and pass along at least some portion to the rest of society, in one form or another. Some credible estimates have suggested uncompensated care adds up to more than $40 billion a year.

Also note that Brown's creditors include providers from three different states. A key issue in the constitutional challenges to the Affordable Care Act is whether health insurance status has consequences for "interstate commerce." If nothing else, this filing is a reminder that the business of health care frequently spans state borders.

Just to be clear, I’m not blaming Brown for her bankruptcy or for her lack of health insurance. Far from it! According to the Journal story, Brown and her husband used to have health insurance -- and dropped it because the cost, more than $1,100 a month, was prohibitive.

That is all too typical of the insurance market today. Small business owners frequently struggle to find decent health benefits, particularly as they get older, because the market for both individuals buying on their own and small businesses is extremely dysfunctional. Insurers jump in and out of the market, broker fees drive up premiums, and plans tend to have spotty benefits. Most important of all, carriers are practice aggressive forms of “risk selection” – that is, altering coverage, raising premiums, or simply denying coverage to people with pre-existing conditions and other signs of medical risk.

Brown told the Journal that the costs of health care are one reason she opposes the law; if the Affordable Care Act takes effect, she said, more businesses will "close because they can't afford health care, and more people will be out of work." But I think the predicament of small business is more an argument for the Affordable Care Act than against it.

The first time I ever heard about Brown was more than a year ago, when Harris Meyer, the veteran health care reporter, wrote about her decision to file suit. As Meyer explained then, a small business owner like Brown likely would be eligible for substantial subsidies.

Depending on Brown's specific financial circumstances, those subsidies could allow her to obtain insurance not only for herself but also for her employees, to whom, according to Meyer’s story, she had not been able to provide coverage. Better still, starting in 2014 Brown could buy insurance through one of the new exchanges – where all plans must include an essential benefits package and where insurers cannot discriminate against people based on medical condition.

I am guessing Brown would disagree. Almost a year ago I had a similar discussion about these issues with Steven Hyder, a small business owner in southeast Michigan who was a named plaintiff in another suit against the Affordable Care Act. He told me, politely but quite firmly, that he believed the mandate was an imposition on his liberty. "It’s a complete intrusion into my business and into my private life," he said.

He's entitled to his opinion, as is Brown and everybody else who doesn't like the Affordable Care Act. And if they wanted to make the case against some substantive provisions of the law, I'd probably agree. (For example, I wish those subsidies were more generous.) But the reality of their lives –specifically, the fact that they will almost certainly get sick and run up medical expenses, as virtually every single person does – suggest that their health insurance status will eventually impact everybody. And that's the issue on which the court decision may turn.

*According to the Journal story, it was a call to the plaintiff attorneys by Journal reporters that prompted the attorneys to notify the Solicitor General’s office of Brown’s bankruptcy status.

Update: I tweaked the wording in a few places – among other things, to make even clearer how much about this case I still don't know. I also wanted to emphasize that the Browns had dropped health insurance because it had gotten so expensive – and that her opposition to the law reflects, in part, her belief that it will make things harder on small business rather than easier.